CAB129-52 — Page 73

Page 73

Printed for the Cabinet. May 1952.

SECRET

CABINET OFFICE

Copy No. 66

C. (52) 171

RECORD COPY ·

23rd May, 1952

CABINET

ECONOMIC POLICY

NOTE BY THE SECRETARY OF THE CABINET

By the Prime Minister's direction I circulate, for the information of the Cabinet, a personal Minute addressed to him by the Paymaster-General on the memorandum by the Chancellor of the Exchequer on Economic Policy (C. (52) 166).

Cabinet Office, S.W.1,

23rd May, 1952.

NORMAN BROOK.

MINUTE FROM THE PAYMASTER-GENERAL TO THE PRIME MINISTER

ECONOMIC POLICY: C. (52) 166

I agree with almost everything in this very important paper. It shows with frightening clarity how much poorer we are than before the war and how much we have increased our commitments. Unless we use the present short breathing space to cut our coat according to our cloth, economic and political disaster will be inevitable.

It is vital to decide quickly on a balanced programme, however painful, on defence, food, housing, &c., and to stick to it. It is no use for the Cabinet to agree broadly that we must balance our overseas accounts and then for each department to come forward with individual cases demanding special piecemeal treatment.

Separate papers or reviews are promised on the main aspects which will have to be considered. These include:

(a) Defence Programme

Reductions seem inevitable. I believe they may best be made by cutting out whole wedges: e.g., anti-aircraft guns may be of little use against modern strategic bombers; £100 million for moving the Middle East base merely to appease Egyptian amour propre is intolerable. If we had a financial disaster and could not import food and materials, the defence programme would ipso facto go by the board. Purely from the defence point of view, therefore, it does not pay to attempt more than we can afford.

(b) Import Programme

A review of 1952-53 is urgent before the pattern is prejudged by the establishment of prior claims. Moreover, the cuts imposed by the Chancellor on imports, especially from E.P.U. countries, are, it seems, being circumvented in some way; our imports are not falling as they should. This should be examined at once.

(c) Investment Programme 1953

A difficult balance will have to be struck between defence, housing, schools, hospitals, electrical generating capacity, &c.

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